Prime Minister Liz Truss has scrapped a key part of the mini-budget Kwasi Kwarteng produced last month—reversing the cut to corporation tax—and has defended her decision to replace him as Chancellor of the Exchequer with Jeremy Hunt.
She said she had decided corporation tax would go up from 19 percent to 25 percent next year—as originally planned by Rishi Sunak—which would raise £18 billion.
The City of London has reacted badly in the last three weeks to the mini-budget, which involved tax cuts of around £43 billion and a big increase in government borrowing.
On Oct. 3 Truss scrapped plans to abolish the top rate of income tax but that has not assuaged the financial markets.
But, on Friday, when asked by one journalist if it was fair that Kwarteng had gone but she remained considering they had been in “lockstep” on the mini-budget, she sidestepped the question and said it had been a “difficult decision” to replace him.
Truss said: “From day one I’ve been ambitious for growth. Since the financial crisis in 2008 the potential of this country has been held back by low growth.”
Reassuring Markets
Truss said: “It’s clear that parts of our mini-budget went further and faster than the financial markets were expecting. So we need to act now to reassure the markets on our fiscal discipline.”Kwarteng was ordered to fly home overnight from International Monetary Fund talks in Washington and was “asked to resign.”
In his resignation letter, Kwarteng praised her “dedication and determination” and said, “I believe your vision is the right one.”
Truss said she was “sorry to lose him” but she praised Hunt as “one of the most experienced and widely respected government ministers and parliamentarians.”
She said he would push through the “supply-side reforms” Britain needed to deliver sustained growth.
The prime minister said she had “acted decisively to ensure economic stability” and had acted in the “national interest.”
Truss concluded her remarks by saying: “I want to be honest. This is difficult. But we will get through this storm and deliver strong and sustainable growth to transform our country for the generations to come.”
Truss defeated former Chancellor Rishi Sunak in a leadership contest over the summer.
Shadow Chancellor Rachel Reeves said the turmoil in the financial markets was a “crisis made in Downing Street,” and she added: “We don’t just need a change in chancellor, we need a change in government. Only Labour offers the leadership and ideas Britain needs to secure the economy and get out of this mess.”
In opinion polls published earlier this month, the Conservatives have dropped to 24 percent, 17 points behind Labour.
But Truss does not have to face a general election until, at the latest, January 2025.
